Getting around the lowest-cost imperative when hiring consultants

Both client and consultant know that the method for contracting professional services is broken, but only the client pays the price.

Cal Harrison, who's helped government agencies in the United States and Canada develop more effective requests for proposals, found out just how much by analyzing awards posted on Canada's largest online-bidding service. His research suggests that, as much as two-thirds of the time, the process of responding to a request for proposal (RFP) costs the industry more than the winning firm will receive in fees.

Why? Because professional services firms build the time-consuming, non-billable administrative effort required to answer ambiguous and unrealistic RFPs into their hourly fees.

As a result, the best firms are increasingly refusing to respond to requests that don't include the most critical parameter for their decision-making process: the project budget. Your task is to remove relatively inconsequential factors such as potential vendors' people, processes, and price from your selection criteria and focus on finding the firm that provides the greatest value: the most expertise that's relevant to your specific challenge.

First, make sure you're asking the right questions. You've probably asked colleagues in neighboring communities how they've defined a particular challenge. If they can't help, call a firm and ask for the highest-level consultant to help you understand what qualifications you should be looking for.

Or post a one-page request for information or request for expression of interest. Outline the proposed project, the budget, and ask for two or three paragraphs on why respondents feel they're the best firm for the job.

Remember: the low-cost providers usually have the least expertise. Consultants provide expertise that takes years to develop and refine, so they know exactly how long a particular solution should take. The firm that can resolve an issue the fastest probably has the best expertise. That firm will also tell you why the task can't be done for the quoted cost and point out other potential problems.

Many public works operations use the "two-envelope" process when awarding construction contracts. After providing the project scope and approximate budget, they'll ask potential vendors to submit their proposed solution separately from their estimate. Harrison says this method is a step in the right direction (more about this topic in our June 2010 issue).

To foster collaboration from the beginning of the relationship, make it safe for firms to ask questions when formulating their proposed solution. Indicate that while at some point (i.e., before your local governing body) answers may be shared, anything other than a request for clarification will not be shared among vendors during the selection process.

Similarly, when you've short-listed firms, invite one to write a formal proposal. This will eliminate the time you spend reviewing long, "hail mary" proposals.

If elected officials want a particular criterion to be included in the decision-making process, such as requiring that you evaluate minority-owned firms, request them to put it in writing and add it to your selection criteria to avert finger-pointing.

To help public works directors save time when retaining professional services, e-mail Harrison a recent request for proposal. (He'll sign a confidentiality request if that will make you feel more comfortable in submitting one). In return, he'll e-mail back a one-page assessment with suggestions for improvements. This is not a legal review.